How Social Media playing an important role to boost The Popularity Of bitcoin.
Predictor in determining bitcoin’s valuation
Bitcoin’s emergence has the potential to pave the way for a technological revolution in financial markets. What determines its valuation is an important open question with far-reaching business and policy implications. Building on information systems and finance literature, we examine the dynamic interactions between social media and the monetary value of bitcoin using textual analysis and vector error correction models. We show that more bullish forum posts are associated with higher future bitcoin values.
Interestingly, social media’s effects on bitcoin are driven primarily by the silent majority, 95 percent of users who are less active and whose contributions amount to less than 40 percent of total messages. In addition, messages on an Internet forum, relative to tweets, have a stronger impact on future bitcoin value. Overall, our findings reveal that social media sentiment is an important predictor in determining bitcoin’s valuation, but not all social media messages are of equal impact. This study offers new insights into the digital currency market and the economic impact of social media.
The Relationship Between Social Media And bitcoin.
social media has continued to play a major role in the way we view cryptocurrencies, and even how many people are aware they exist. To be successful, a cryptocurrency needs to have a significant user base, and with the sheer reach that social media offers, this can be fulfilled. It’s thought that two-thirds of adults in America alone get their news from social media, meaning that any story spread about the digital currency online has the potential to reach upwards of 4 billion people.
With Facebook having recently announced the release of its own cryptocurrency, the reach of these digital currencies has the potential to extend even further. With the sheer power that Facebook has, a well-organized algorithm that puts crypto-related news and ads on a timeline can either influence users into investing or going against cryptocurrencies depending on what’s viewed. Clement Thibault at Investing.com, commented: “Facebook, with over two billion monthly active users, can basically drive the mass adoption of anything.
How The Media Effects Cryptocurrencies
While we know that social media has an effect on our behavior and how we feel about cryptocurrencies, this all comes down to the media in general. Without standard media influence, there would be nothing to share on social media besides opinion-based tweets. The lack of central regulation for a cryptocurrency is one of the driving forces behind its popularity but is also the reason why the media can have such an effect on how they perform.
Two main contributions by social media
This research makes two main contributions. First, we develop a more comprehensive understanding of the various factors behind the monetary value of bitcoin. We show that social media sentiment is a meaningful source of variation that can explain and predict bitcoin value.
These findings offer a new perspective on the emergence of bitcoin and the diffusion of Innovations—for example, prices of digital currencies are subject to the same Keynesian “animal spirits” observed in traditional markets. Theories and empirical models adoptions should take this perspective into consideration.